Spirit Airlines’ expansion & unit revenue declines concern Wall Street, but are central to the model

After years of being heralded by Wall Street for its stellar financial performance, US ULCC Spirit Airlines has been on the defensive in 2H2015 as investors navigate the airline's 30% capacity growth alongside outsized decreases in unit revenues compared with the rest of the industry.

Spirit is defending its capacity expansion, contending that it can deliver higher returns by growing than by not expanding. Part of the airline's logic is that its cost structure allows it to be one of the most efficient seat producers within the industry.

Similar to other airlines, Spirit is attempting to convince investors not to place a significant amount of attention on unit revenue performance. Instead, the airline is trying to direct attention to margins and earnings as its stock price has faced some compression in the aftermath of growing capacity and falling unit revenues.